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PROCTOR | July 2016
Notes
1 s267(2), PPSA.
2 s13(2)(a), PPSA.
3 A lessor’s interest under a finance lease is
an ‘in substance’ security interest pursuant
to s12(1), PPSA. A lessor’s interest under an
operating lease is only a security interest if it
is a PPS lease; ss12(3)(c) and 13, PPSA.
4 s8(1)(j), PPSA.
5 [2016] NSWSC 52 at [49].
6 [2016] NSWSC 52 at [51] to [53].
7 See, for example, Holland v Hodgson (1872)
LR7CP 328; [1861-73] All ER Rep 237; Reid
v Smith (1905) 3 CLR 656; 12 ALR 126;
BC0500022; Commissioner of Stamps (WA)
v Whiteman Ltd (1940) 64 CLR 407; 14 ALJR
260; BC4090104; Lees & Leech Pty Ltd v Cmr
of Taxation (1997) 73 FCR 136; 97 ATC 4407;
36 ATR 127; BC9702029; Australian Provincial
Assurance Co Ltd v Coroneo (1938) 38 SR
(NSW) 700; 55 WN (NSW) 246; Loiero (aka
Lero) v Adel Sportswear Pty Ltd (2010) 15 BPR
29,689; [2010] NSWSC 1133; BC201007558;
Attorney-General (Cth) v RT Co Pty Ltd (No.2)
(1957) 97 CLR 146; 31 ALJR 504; BC5700320;
Metal Manufactures Ltd v Federal Commissioner
of Taxation (1999) 99 ATC 5229; 43 ATR
375; BC9908011; National Dairies WA Ltd v
Commissioner of State Revenue (2001) 24
WAR 70; 47 ATR 31; [2001] WASCA 112;
BC200101603; Pegasus Gold Australia Ltd v
Metso Minerals (Australia) Ltd (2003) 16 NTLR
54; [2003]NTCA 3; BC200300346; TEC Desert
Pty Ltd v Commissioner of State Revenue (WA)
(2010) 241 CLR 576; 273 ALR 134; [2010] HCA
49; BC201009579; Commissioner of State
Revenue v Uniqema Pty Ltd (2004) 9 VR 523;
56 ATR 19; [2004] VSCA 82; BC200402775;
Commissioner of State Revenue (Vic) v Snowy
Hydro Ltd [2012] VSCA 145; BC201204715;
Agripower Australia Ltd v J & D Rigging Pty
Ltd [2013] QSC 164; BC201310475; Re
Cancer Care Institute of Australia Pty Ltd
(admin apptd) (2013) 16 BPR 31,529; [2013]
NSWSC 37; BC201300325; Agripower Barraba
Pty Ltd v Bloomfield [2013] NSWSC 1598;
BC201314682.
8 s10, PPSA.
9 s8(1)(f)(i), 8(1)(j).
It’s happened before, but a recent New South Wales case drives
home the message that lessors who do not perfect their purchase
money security interest are likely to find themselves in a perilous
and costly position. Report by Craig Wappett.
This article appears courtesy of the Queensland Law
Society Banking and Financial Services Law Committee
and was previously published in the Insolvency Law
Bulletin (LexisNexis), March 2016. Craig Wappett is a
partner at Johnson Winter & Slattery, and a member
of the committee.
Did the turbines become fixtures?
In section 10 of the PPSA ‘fixtures’ is defined
as “goods, other than crops, that are affixed
to land”.
GE and the other defendants contended
that the definition in section 10 introduced
a specific meaning of “affixed to land”, being
“a non-trivial attachment”. Forge argued that
the common law test of what is, or is not,
a fixture applies under the PPSA. The
common law test focuses on the intention
of the person affixing goods to land. Intention
is imputed from the degree of annexation
and the object or intention of annexation
based on the facts of each case.7
The court held that:
• The words “affixed to land” in the definition
of fixtures in section 10 meant affixed
according to common law concepts, and
• the turbines did not become fixtures.
The court observed that one of the critical
features of the PPSA is its non-application to
interests in land. Land is expressly excluded
from the definition of personal property8 and
various other provisions in the PPSA make it
clear that interests in land are not subject to
the operation of the Act.9 The court believed
that applying the common law meaning
of fixtures was more consistent with the
exclusion of interests in land from the scope
of the PPSA than the alternate approach
suggested by GE.
Having determined that the common law
meaning of fixtures applies in the context
of the PPSA, the court went on to find
that the turbines had not become fixtures.
In reaching this conclusion, the court
considered the following factors:
• The turbines were designed to be
demobilised and moved to another site
easily and in a short time. Relevantly, the
turbines remained mounted on wheeled
trailers while leased.
• The turbines were only intended to be in
position on the temporary power station
site for a rental term of two years, subject
to some limited rights of extension.
• Forge was contractually obliged to return
the turbines at the end of the rental term.
• Anchoring equipment intended to prevent
damage to the turbines during cyclonic
weather conditions was designed to be
easily removed for demobilisation and
re-use at a new site.
• The attachment of the turbines to the
land, through the use of anchoring
equipment, was for the better enjoinment
of the turbines and not for the better
enjoinment of the land.
• Removal of the turbines would cause
no damage to the land.
• Removal of the turbines from the site
would not destroy or damage the turbines.
• The cost of removal of the turbines from
the site was modest in comparison to
the value of the turbines.
• The head contract included an express
term that property in the turbines would
not pass to the owner of the land.
• The lease included a term that the
turbines would remain at all times personal
property notwithstanding that they may
be affixed or attached to any other
personal or real property.
• Forge was not the owner of the site
and it plainly did not intend to make a
gift of the turbines to Horizon Power.
• GE prescribed the mechanism for
attachment of the turbines at the site
and plainly did not intend the turbines
to become the property of the owner
of the land.
Conclusion
The decision in the Forge case is not
exceptional, but it does confirm the perilous
position of lessors who do not perfect their
purchase money security interest, and it
helps to clarify a couple of threshold issues
which have been the subject of some debate.
Banking and finance
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